PNC Growth Strategy: Get 'Em While They're Young

It is not just back to school time for college students — PNC Financial Services Group (PNC) has been hitting the stacks as well.

Over the last few weeks, the Pittsburgh company has forged deals with three universities and it is eyeing others within its markets as more contracts for campus ATMs, branches and other banking services are put out for bid. Following its March acquisition of RBC Bank USA, PNC is especially looking for deals in the Southeast, according to Nick Certo, senior vice president and manager of university and workplace banking for the $292 billion-asset PNC Bank.

At least two dozen schools have "told us that they are going to be approaching the market in the next six months, looking for partners," Certo says.

PNC has focused on a variety of partnerships with colleges and universities since the mid-1990s and, as it has grown, so too has its campus presence. It now has more than 200 university banking relationships within its 15-state footprint.

Like many banks, PNC is aiming to boost visibility on college campuses as a way to attract young consumers who many not have a dime to their names now but have high earnings potential down the road. "Degreed individuals are more affluent" than people without degrees, Certo says.

The relationship PNC has with each school can vary and is sometimes an evolutionary process, Certo says. At first the bank may only talk to the school's students and employees about checking or savings accounts and over time may expand upon that initial relationship to include other services.

In its agreement with Georgetown University announced earlier this month, students and university employees will be able to link their campus cards to PNC Bank accounts. They can then use their campus card like a debit card. The bank also has plans to add a fourth ATM on campus.

In other deals announced in September, PNC said it would install a dozen ATMs in the student center and athletic facilities at Auburn University in Alabama and that it would open an electronic branch, which has customer service employees rather than tellers, at the University of Maryland, Baltimore County.

PNC's hope, of course, is to retain these college students as customers once they graduate. Certo says that PNC has been "successful" in this regard but declined to give specific numbers.

PNC isn't the only bank that sees potential in college students. Other banks, including Huntington Bancshares (HBAN) and Webster Financial (WBS), have recently struck deals with major universities as they seek to boost market share.

This isn't surprising considering the earnings potential for college graduates over their lifetimes — and the pressure on banks to add customers and grow top-line revenues, says Scott Siefers, a managing director at Sandler O'Neill & Partners. Aside from traditional banking products, college graduates may also be are candidates for asset management products in the future, Siefers says.

"We are at a point in the industry where profitability is not easy to grow," Siefers says. "To the extent that you can attract and retain customers, including the young who could be with you over a long period of time, is good. Hopefully you can sell them additional products over time."

The deals can be good for ones colleges, too. Huntington, for example, is donating $25 million to Ohio State under its agreement that the school will use for scholarships and academic programs. Webster is also helping to foot the bill for the construction of a new basketball practice facility at UConn. Terms of its agreement were not disclosed, though Webster said in an August news release that its investment is "significant."

PNC's Certo, for his part, says he expects see more banks strike deals with colleges and universities.

"With the challenges our industry faces, the opportunity to acquire customers anywhere has to be under consideration," Certo says. "I wouldn't be surprised if more people try this business."